In some cases, PPPoE clients do not honor the negotiated MRU during the LCP phase and consequently, they send packets larger than the negotiated MRU. This applies to control and data packets.
In this case, the LAC fragments IPv4 packets which then have to be reassembled in LNS.
In general, reassembly processing applies only to the end nodes that are receiving fragments. In tunneled environment a fragmented packet must be reassembled before it is de-encapsulated.